NEWARK, N.J., Oct. 5, 2016 /PRNewswire/ -- PSEG announced today
that its Hudson Generation Station in Jersey City, N.J., and its Mercer Generation
Station in Hamilton Township,
N.J., will be retired on June 1,
2017.
"The sustained low prices of natural gas have put economic
pressure on these plants for some time. In that context, we could
not justify the significant investment required to upgrade these
plants to meet the new reliability standards," said Bill Levis, president and chief operating
officer-PSEG Power. "The plants have been infrequently called on to
run and neither plant cleared the last two PJM capacity auctions.
The plants' capacity payments have been critical to their
profitability and PSEG's ability to continue to invest in
modernizing them."
PSEG stressed that it is committed to treating the approximately
200 employees at Hudson and
Mercer fairly during the process
of retiring the existing units.
"These plants have played a critical role in powering the growth
and economic expansion of New
Jersey and PSEG is grateful to our employees who have played
a part in building and running them for the past 50 years," said
Levis. "We will work with our union and PSEG leadership to ensure
that the plants continue to operate safely through their retirement
dates and to place as many employees as possible within PSEG's
family of companies."
PSEG remains committed to meeting the long-term energy needs of
New Jersey and the region and
currently is investing more than $600
million in a new state-of-the-art combined-cycled gas plant
in Sewaren, N.J., as well as new
plants in Connecticut and
Maryland. Currently, PSEG Power
has gas facilities representing nearly 4,000 MWs of generating
capacity in New Jersey and owns
3,740 MWs of nuclear generation, of which approximately 2,500 MWs
are located in New Jersey.
PSEG has long been an advocate for fuel diversity, both in its
generation fleet and in the PJM pool. With the announced closing of
the coal plants, New Jersey's
energy now will be split almost evenly between nuclear and natural
gas, with a small but growing amount of renewable energy. "We
continue to believe that it is unwise for New Jersey to become too overly dependent on
one source of energy," said Levis. "With the continued low cost of
natural gas, it is important that we recognize and support the full
value of non-carbon, non-polluting nuclear and renewable
energy."
PSEG noted that it is evaluating all options for future use of
the sites.
The decision to retire the Hudson and Mercer plants early triggers certain changes
in accounting treatment that will have a material effect on PSEG's
and PSEG Power's reported results. In the third quarter of 2016,
PSEG and PSEG Power expect to recognize one-time charges in Energy
Costs and Operation and Maintenance expense ranging from an
estimated $40 million to $70 million
and $35 million to $77 million,
respectively, related to the cost of shutting down these units,
including coal and other materials and supplies, inventory reserve
adjustments, employee-related continuance, and severance benefits
costs.
In addition to these one-time charges, there will be ongoing
annual incremental non-cash charges to earnings of $560 million to $580 million in 2016 and
$940 million to $960 million in 2017
due to the shortening of the expected economic useful lives of the
Hudson and Mercer plants. These charges are detailed in
the Form 8K that PSEG and PSEG Power filed today and will be
discussed in more detail when PSEG reports third quarter earnings
on October 31, 2016.
Mercer Generation Station was opened in 1960. It currently
has a capacity of 632 MWs. Hudson Generation Station was opened in
1968 and had a capacity of 620 MWs. The 200 employees are roughly
split between the two locations.
Public Service Enterprise Group (NYSE: PEG) is a publicly
traded diversified energy company with annual revenues of
$10.4 billion. Its operating
subsidiaries are: Public Service Electric and Gas Company
(PSE&G), PSEG Power, and PSEG Long Island.
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Forward-Looking Statement
The statements contained in
this communication about our and our subsidiaries' future
performance, including, without limitation, future revenues,
earnings, strategies, prospects, consequences and all other
statements that are not purely historical, are forward-looking
statements for purposes of the safe harbor provisions under The
Private Securities Litigation Reform Act of 1995. Although we
believe that our expectations are based on information currently
available and on reasonable assumptions, we can give no assurance
they will be achieved. There are a number of risks and
uncertainties that could cause actual results to differ materially
from the forward-looking statements made herein. A discussion of
some of these risks and uncertainties is contained in our Annual
Report on Form 10-K and subsequent reports on Form 10-Q and Form
8-K filed with the Securities and Exchange Commission (SEC), and
available on our website: http://www.pseg.com. These documents
address in further detail our business, industry issues and other
factors that could cause actual results to differ materially from
those indicated in this communication. In addition, any
forward-looking statements included herein represent our estimates
only as of the date hereof and should not be relied upon as
representing our estimates as of any subsequent date. While we may
elect to update forward-looking statements from time to time, we
specifically disclaim any obligation to do so, even if our internal
estimates change, unless otherwise required by applicable
securities laws.
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SOURCE Public Service Enterprise Group (PSEG)